What is the difference between expenses and purchases?
Sarah Martinez
Updated on January 01, 2026
Purchases are goods purchased for cash or on credit or on account while Expenses are incurred for the purpose of earning Revenues for the business. There are two types of purchases i.e., Cash Purchases and Credit Purchases while two main types of expenses are Direct Expenses and Indirect Expenses.
What are purchases expenses?
Purchase Expenses means brokerage commissions, transfer taxes and other charges or expenses on the purchase of Shares. Purchase Expenses means all expenses incurred in connection with the purchase of outstanding shares of Common Stock for delivery under the Plan pursuant to Section 5.5.
What do you mean by expenses?
An expense is the cost of operations that a company incurs to generate revenue. As the popular saying goes, “it costs money to make money.” Common expenses include payments to suppliers, employee wages, factory leases, and equipment depreciation.
What is the difference between expense and spend?
Comparing Expenses and Expenditures The key difference between an expense and an expenditure is that an expense recognizes the consumption of a cost, while an expenditure represents the disbursement of funds. An expenditure is usually recognized either when cash is paid out or a liability is incurred.
What are examples of expenditures?
Expenditure Example
| S. No | Expenditure Type | Expenditure Classification |
|---|---|---|
| 1 | Purchase of raw materials | Revenue Expenditure – Direct |
| 2 | Electricity bills | Revenue Expenditure – indirect |
| 3 | Advertising expenses | Revenue Expenditure – indirect |
| 4 | Direct labor costs | Revenue Expenditure – Direct |
What type of account is a discount on purchases?
contra‐expense account
Companies that take advantage of sales discounts usually record them in an account named purchases discounts, which is another contra‐expense account that is subtracted from purchases on the income statement.
Is purchases an expense or income?
Purchase is the cost of buying inventory during a period for the purpose of sale in the ordinary course of the business. It is therefore a kind of expense and is hence included in the income statement within the cost of goods sold.
